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Out-Law Analysis 3 min. read

How to create a Consumer Duty implementation plan

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A key deadline in the New Consumer Duty’s implementation period is fast approaching as the Financial Conduct Authority (FCA) looks to ensure that firms are ready for its entry into force next year.

Businesses have until 31 October for their boards to have signed off on Consumer Duty implementation plans. The FCA has said firms should expect to be asked to share their plans, board papers and minutes with FCA supervisors and should expect to be challenged on their contents.

It is crucial that a firm’s plan contains enough detail to reassure the FCA that it will meet the deadline for implementation of the Consumer Duty on 31 July 2023. Being realistic is key – both on what work needs to be done and the time it will take to complete it, and the FCA expects boards to have an ongoing role to ensure implementation remains on track.

Creating a Consumer Duty implementation plan

According to the FCA, to meet the new standards implementation plans should be deliverable and robust and boards should have scrutinised and challenged them. In a speech last month, Sheldon Mills, FCA executive director, said plans should be “sufficiently developed” to provide the board and the FCA with assurance that the implementation deadline will be met, but said the regulator does not expect firms to have fully scoped all the work at this stage.

Implementation plans will always be bespoke to the individual firm and the products and services they offer or are involved in distributing. In order to implement the Consumer Duty, firms will need to complete a number of tasks, including reviews of policies and procedures, products and services and management information needed to meet the monitoring obligation.

Firms should conduct gap analysis and identify and complete – where possible – any rectification action that needs to be done ahead of 31 July. They should also establish new processes that they have identified as necessary to meet the expectations in the Consumer Duty around ongoing monitoring and review of customer outcomes, awareness of foreseeable harm, and rectification of any issues during the product cycle.

The implementation plan will need to set out how firms will be looking to complete these tasks within the timeframe for implementation. It should demonstrate that the firm has properly considered the nature of its business and the whole scope of activities they may need to undertake, and has allocated realistic time to carry out all the activities, mindful of the overall deadline.

The implementation plan should also demonstrate that the firm has prepared for oversight of the activities with reporting lines established to ensure they are done, and has ensured adequate senior oversight of implementation, including board oversight – in line with the FCA’s expectation of boards’ ongoing role in implementation.

The overall plan may be supported by more detailed breakdown plans for each particular workstream, but overall, the board should see a plan that gives a realistic idea of the work the firm needs to undertake – including where this involves more detailed planning. The board should also see a realistic timetable within which the plan will be delivered, as well as the reporting and governance structures that will be in place to give the board comfort that the July deadline will be met.

Board approval

The FCA is looking for evidence that boards have scrutinised and challenged the implementation plans. Ultimately the question for the board is, having read their firm’s implementation plan, are they are comfortable that the firm will be implementing on time?

A firm that can point to relevant board papers, minutes on comprehensive discussion of the implementation plan and that can provide a plan that sets out a realistic assessment of the tasks and timescales, and provides for proper allocation and resource within the business, should assist the board to demonstrate how and why it is confident implementation will be achieved by 31 July 2023, putting it in a good position for satisfying the FCA’s expectations on implementation plans.

Further guidance

Implementation plans will also need to be flexible enough to cope with any more detailed material the FCA releases through the implementation period. The regulator has announced dates for a series of four webinars in October and November to help firms achieve this.

The FCA also indicated in its policy statement (161 pages / 1.31MB PDF) that it will be looking to issue further guidance as well as examples of good and poor practice. The FCA recently published a consumer duty webpage for firms that it plans to update.

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